The global economy will shrink this year for the first time since the second world war as the "Great Recession" ravages businesses, consumers and financial institutions around the world, the International Monetary Fund warned today.

Speaking in Tanzania, IMF managing director Dominique Strauss-Kahn said the economic downturn would be more severe than previously thought.

"The IMF expects global growth to slow below zero this year, the worst performance in most of our lifetimes," Strauss-Kahn told African political and financial leaders in Dar Es Salaam.

"Continued de-leveraging by world financial institutions, combined with a collapse in consumer and business confidence, is depressing domestic demand across the globe, while world trade is falling at an alarming rate and commodity prices have tumbled."

Strauss-Kahn dubbed the downturn the "Great Recession". The world economy has not suffered an annual contraction since 1945. There appears to be broad consensus that the economic downturn will be much deeper and more protracted than most experts thought just a few months ago.

In January, the IMF predicted that the world economy would grow by 0.5%, which was already a sharp revision of its earlier prediction of 2.2% growth. That was based on 3.3% expansion in developing countries and 2% contraction in advanced economies.

The IMF is expected to announce fresh official projections later this month.

Strauss-Kahn's warning, made at a conference to examine the impact of the financial crisis on Africa, comes just two days after the World Bank predicted that the global economy would shrink by at least 1% this year.

The World Bank also forecast on Sunday that trade would suffer the biggest decline in 80 years, and said that by this summer industrial output could be 15% lower than in 2008.

Darling: 'Moral imperative' to help poorer neighbours

The downturn has already sent unemployment rising sharply on both sides of the Atlantic, with analysts fearing that the UK jobless total will exceed 3 million before the crisis is finished. There are concerns, though, that developing nations will be hit even harder. Writing in the Guardian today, Alistair Darling says that Europe's leaders have a "moral imperative" to step in to help poorer nations.

"The International Monetary Fund has identified 26 countries, half in sub-Saharan Africa, that are particularly vulnerable to the crisis. Central and eastern European economies are estimated to face a financing gap of $100bn in 2009. And the World Bank estimates that 129 developing countries are facing a financing shortfall of between $270 and $700bn," writes the chancellor.

"Many decades of economic union have brought greater prosperity, but closer economic integration also brings challenges. We are all affected by what happens to our neighbours," he adds.

IMF: We need more funding

The IMF has already bailed out several countries that have been particularly badly hit by the financial meltdown, including Iceland, Ukraine and Hungary. With the crisis escalating, there is growing pressure to double the IMF's emergency rescue fund to $500bn.

This issue will be debated when finance ministers from the group of 20 leading economies meet this weekend, and European Union finance ministers are expected to announce their support for this move later today.

Darling has already indicated that he backs the proposal, writing in the Guaridan: "For those most at risk, we need to increase financing through the International Monetary Fund and multilateral banks, through swap lines between central banks, and an enhanced lending facility at the EU level."